UTSCH LANKA (PVT) LTD., AND ANOTHER VS. DEPUTY DIRECTOR OF CUSTOMS AND OTHERS

UTSCH LANKA (PVT) LTD., AND ANOTHER VS.
DEPUTY DIRECTOR OF CUSTOMS AND OTHERS

COURT OF APPEAL
SRISKANDARAJAH, J.
CA 82/2007
JANUARY 12,2011
FEBRUARY 25,2011
APRIL 1, 4, 2011

Customs Ordinance - Section 47, Section 51, Section 52 - Willfully failing to classify goods - Misdescription - Non declaration of royalty -Is it undervaluation?

Erich Utsch AG - a German Company - entered into an agreement with Commissioner of Motor Vehicles for the delivery of retro reflective number plates with embossed number and 3rd number plate sticker for windscreen for a period of 5 years. The 1st petitioner company was incorporated in Sri Lanka to facilitate the above agreement. Erich Utsch AG as the licensor granted an exclusive right to the 1st petitioner to use the necessary technology, expertise and to obtain training required by the 1st petitioner as licensee. The terms and conditions included a payment of a Royalty Fee of 10% per annum of the total turnover. A building belonging to the Commissioner of Motor Traffic was given to the 1st petitioner for the storage of imported blank plates and to emboss I number in the blank plates.

The 1st petitioner imported blank plates and the raw materials from the German Company on a commercial basis. The tariff classification i advice was 7616.00. The petitioner had been declaring the imported item under HS 7616 code until one of the imports were questioned at the examination point. After inquiry, the petitioners were charged by the Customs - for willfully failing to classify and pay the customs duties and other levies. At the conclusion of the inquiry order of forfeiture of goods in terms of Sections 47, 129,166B was made. Further an order on the importer to disclose all the relevant and material evidence to the customs in declaring the goods at the time

of importation. The Respondents contention was that the importer has willfully failed to classify and pay the custom duties and other levies correctly and that the petitioners have willfully classified aluminium plates under HS 7606.99.09 disregarding the fact that the invoice from the German Company state that the HS Code is 8310.00. The respondents further contended that as regards royalty payments, the importer has to declare the royalty payments to the Customs in order to determine the value of the goods imported. It was further contended the World Health Organization (W.H.0) had described the goods in issue under Heading 83.10.

Held:

(1) Blank plates imported contain several lion water marks, pre engraved secret numbers and the national emblem (Sri Lanka) security measures, after importation the importer as per the agreement embosses two letters. four numbers across the plate separated by a dash with a provincial identification (two) letters. The World Customs Organisation had described the goods in issue under heading 83.10 not because the blank plate contains key letters, number or designs on them but because the plate is designed for the subsequent insertion of details.

In view of this opinion all the consignments of aluminium plates imported by the 1st petitioner falls within the classification of HS code 8310:00 and the duties short levied could be recovered as provided for in Section 18.

(2) Royalty payment is not related to the imported goods or it is a condition of sale of the imported goods, therefore the royalty payment need not be added to the price actually paid. Failure to enter the payment of royalties in the Customs Value Declaration Form will not amount to a false declaration to charge the petitioners under Section 52

APPLICATION for a Writ of Certiorari.

Cases referred to :-

(1) Toyota Lanka (Pvt.) Ltd vs. JayatiIaka Director General of Customs - CA 2093/2005 - C.A.M. 1.10.07

(2) Toyota Lanka (Pvt) Ltd vs. Director General of Customs SC 49/2008 - SCM 29.03.2009

(3) Commissioner of Customs (Port) v

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